The High Court has ordered a Sligo development company to provide security for legal costs in its construction dispute with Laing O’Rourke Ireland Limited.
Connaughton Road Construction Limited brought proceedings arising from a residential and retail development at Connaughton Road in Sligo. Its principal, John Molloy, owned the development lands, while Connaughton Road was intended to carry out construction.
The company alleges that Laing O’Rourke failed in obligations relating to the design and construction of the project. Laing O’Rourke denies the claims, including disputes over whether it had design responsibilities, the nature of the contract price and responsibility for delay.
The present ruling did not decide those substantive issues. Instead, Laing O’Rourke applied under the Companies Act 1963 for security for costs. Such an order requires a plaintiff company to provide money or other security against the defendant’s legal costs should the defendant ultimately win.
Connaughton Road accepted that it would be unable to pay Laing O’Rourke’s costs if it lost and that Laing O’Rourke had established a prima facie defence. The issue was whether an exception should apply because Connaughton Road’s financial position was itself caused by the alleged wrongdoing forming the basis of the lawsuit.
Mr Justice Clarke held that the company had not established that exception. Connaughton Road had nominal capital of €2 and needed to show that, without the alleged wrongdoing, the development would have generated profits sufficient to meet the defendant’s likely costs.
The court found the available financial evidence inadequate. An AIB document projected a €1.77 million company profit, but the judge found it unclear how that figure had been calculated. He also identified unanswered questions about social and affordable housing obligations and how sales proceeds were to be divided between Connaughton Road and Molloy personally.
Security for costs was therefore ordered. The exact amount was left for a further hearing, with Laing O’Rourke having estimated its costs at about €632,500.